Senate Republicans block debate on Wall Street overhaul bill

Led by Senator Richard Shelby (pictured) Republicans mustered enough votes to block debate of a financial regulation reform bill on Monday, dealing a temporary setback to its backers and drawing a swift rebuke from US President Barack Obama.

AFP - Sweeping legislation to rein in Wall Street has suffered a temporary setback in the US Senate, as President Barack Obama's Republican foes defeated a push to formally take up the bill.

Lawmakers voted 57-41 Monday to open debate, falling short of the 60 needed to move ahead with the most ambitious regulatory overhaul of its kind since the Great Depression of the 1930s, and drawing a swift rebuke from the president.

"I am deeply disappointed that Senate Republicans voted in a block against allowing a public debate on Wall Street reform to begin," Obama, who has made the overhaul his top domestic priority, said in a statement.

Spurred on by US public anger at big banks blamed for the 2008 global economic meltdown, and facing November mid-term elections, both Democrats and Republicans say they want tough new rules on Wall Street.

But Republicans opposed the bill as drafted and said they would not agree to open debate until year-old, closed-door talks on drafting a compromise bill have run their course.

"Some of these Senators may believe that this obstruction is a good political strategy, and others may see delay as an opportunity to take this debate behind closed doors, where financial industry lobbyists can water down reform or kill it altogether," said Obama.

Democratic Senator Ben Nelson joined 39 Republicans in voting against the motion, while two Republicans did not vote.

Democratic Senate Majority Leader Harry Reid voted no for procedural reasons -- it enabled him to bring up the bill again at a moment's notice, perhaps as early as Tuesday -- and said he expected "more votes this week" on the issue.

"We remain open to working with our Republican colleagues, but we will not tolerate efforts to slow-walk this process or water down this reform because it is too important to middle-class families," Reid said in a statement.

The vote came as a key Senate committee geared up to grill top Goldman Sachs executives Tuesday about the embattled Wall Street investment giant's controversial actions in the run up to the worldwide meltdown.

Amid anger at Goldman and other big banks, a new Washington Post/ABC poll found the US public backs tougher rules for Wall Street by a 65-31 percent margin. The error margin was plus or minus three percentage points.

Senate Minority Leader Mitch McConnell denied that his party was siding with big banks and investment firms, saying that Republicans want to "tighten the screws on Wall Street" but don't want "to be rushed" into the legislation.

Senator Richard Shelby, the top Republican on the Senate Banking Committee, said he expected Republicans to "stand together," giving them "more negotiating authority and more clout" in closed-door talks to craft a compromise bill.

The bill aims to usher in sweeping new regulations on Wall Street a decade after Democrats and Republicans together stripped the system of rules enacted after the Great Depression.

The measure, championed by US Senate Banking Committee Chairman Chris Dodd, a Democrat, would notably try to address the problem of financial institutions whose collapse could risk crippling the US economy.

The bill maps a way to dissolve such "too big to fail" firms in a bid to avoid massive taxpayer-funded "bailouts" approved in late 2008.

The legislation -- widely seen as less muscular than an approach that cleared the House of Representatives last year -- would also establish a new agency to protect consumers from shady lending practices.

The final legislation will also tighten regulations on the giant market in derivatives -- complex, privately traded instruments tied to the underlying value of a commodity and seen as vehicles for dangerous speculation.

Senate passage would be a key step, but that bill and the House version would have to be merged into one, which would then need to be approved again to be sent to Obama.

The political pressure on Republicans was mounting, as current and former executives from Goldman were expected to face tough questioning Tuesday before the US Senate Homeland Security and Governmental Affairs Committee.

Democrats on the panel were expected to grill Goldman Sachs chief executive Lloyd Blankfein, as well as Fabrice Tourre, a French national in Goldman's London office who has been tied to US fraud charges against the company.